Clydesdale & Yorkshire Bank accused of 'bullying' businessman

Clydesdale & Yorkshire Bank has been accused of “unwarranted and misguided
aggression” for demanding that a property developer should repay a £5m loan
after he complained about being mis-sold an interest rate swap.

Nick Brown said he would be writing again to the bank to complain about the treatment of his constituent and would be raising the case with the FSAPhoto: PA

Lawyers for the North East-based businessman wrote to the lender to complain after it sent him a letter last week saying he must repay within seven days his entire loan of £3.8m as well as £1.2m in “breakage” costs.

In a letter seen by The Daily Telegraph, law firm Carter Ruck said Clydesdale & Yorkshire Bank’s conduct was “extraordinary and is wholly at odds with the approach taken by every other institution with which we are dealing”.

Guto Bebb MP, the chairman of the all-party parliamentary group on swap mis-selling, said the actions of the bank were among the worst he had seen since becoming aware of the issue of interest rate swap mis-selling.

The businessman, who asked not to be named, claims that after complaining to his local MP Nick Brown about the derivatives embedded in his loan, the bank withdrew a £15,000 overdraft facility on his account and told him that he had a week to clear his overdraft.

After informing the bank that his account would be back in credit within two weeks, the lender began enforcement action eight days later by ordering the repayment of the entire loan, including the breakage costs on the derivatives.

At the time he took out the loan, the businessman was told the cost of closing out the derivatives would be about £27,950. Today the breakage costs total £1.21m.

“This behaviour is completely inappropriate in the context of what banks have agreed with the Financial Services Authority. It is also utterly unacceptable to include the breakage costs on top of the loan. The FSA need to get a grip of this,” said Mr Bebb.

Mr Brown said he would be writing again to the bank to complain about the treatment of his constituent and would be raising the case with the FSA.

“This is just bullying. He [the developer] has conducted his business in good faith and is able to meet his commitments,” said Mr Brown.

Along with 10 other banks, Clydesdale & Yorkshire signed up to an FSA-led independent scheme to compensate small businesses mis-sold interest rate swaps.

Included in the agreement was a commitment by the banks not to withdraw loans from effected businesses in anything but “exceptional circumstances”.

In the businessman’s case, the interest rate derivatives were embedded within his loan and not sold as standalone products, meaning they fall outside the current boundaries of the FSA scheme.

After being handed the details of the businessman’s case, a spokesman for the FSA said: “The agreement we have reached with the banks only covers the review of interest rate hedging products that were agreed separately to a loan. We expect all regulated firms to treat their customers fairly.”

In a statement the bank said: “We would stress that we are committed to working with our customers and only when we reach a point where it becomes clear we have a substantive divergence of views do we pursue alternative options to remediate our risks.”